Latest news with #BoErickson
Yahoo
01-07-2025
- Business
- Yahoo
Republicans ignore debt worry as they push forward on Trump tax-cut bill
By David Morgan, Bo Erickson and Davide Barbuscia WASHINGTON (Reuters) -As President Donald Trump's Republicans push ahead on a sweeping tax-cut and spending bill that nonpartisan analysts say could add $3.3 trillion to the nation's debt over the next decade, they're taking a new approach - denying there is anything to worry about. Instead, they argue that extending and adding to tax cuts signed into law by Trump in 2017 during his first term - which were set to sunset in 2025 to limit their hit to the deficit - will not drive the debt higher. Independent analysts and investors said the approach, which follows years of growing government debt under both parties, threatens to erode the country's fiscal health and further sap confidence in financial markets, already shaken by Moody's move in May to strip the U.S. of its top-tier AAA rating. The bill, passed by the Senate on Tuesday and which House of Representatives Republican leaders aim to pass later this week, will also raise the federal government's self-imposed debt ceiling by $5 trillion, averting the risk of a disastrous default on the nation's $36.2 trillion in debt sometime this summer. A handful of Republican deficit hawks have said that fact alone undercuts their party's argument that the bill does not add to the debt. "They are effectively moving the goal posts and making it much easier to run these incredible deficits ad infinitum," said Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income, which manages bond funds worth around $860 billion as of March. "That should really create concern in the market about these ongoing large budget deficits." Democrats - effectively sidelined by a Republican maneuver that bypasses normal chamber rules requiring 60 of the 100 senators to agree on most legislation - have blasted the Republican argument as chicanery. They say the bill, which would also lift taxes on tips and overtime, and boost spending on the military and border security while cutting spending on Medicaid and food assistance, will disproportionately help the wealthy and burden lower-income Americans. "It is fakery. The budget numbers are a fraud, but the deficits will be very real. The prospect of a catastrophic debt spiral is very real," Senator Ron Wyden of Oregon said on the Senate floor on Monday. 'PROTECTING THEIR WALLETS' Republican Senate Finance Committee Chairman Mike Crapo argued that extending the 2017 tax cuts will not add to the debt. "If you don't raise taxes, you're not changing the tax code, you're making it bring in the same revenue that it brought in before," said Crapo, of Idaho. "You're not increasing the deficit, you're protecting their wallets." Republicans also called Democrats hypocritical for accusing them of driving the deficit higher, noting that during President Joe Biden's term the then-Democratic-controlled Congress passed costly legislation using the same fast-track maneuver to circumvent the 60-vote threshold. Senate Republicans said their current policy accounting approach is necessary to make the tax cuts permanent to provide certainty for businesses and investors, something Trump demanded during the 2024 campaign. Their approach is backed by business lobbyists including the U.S. Chamber of Commerce. "That's a good thing for the American people. That's a good thing for the economy," Senate Budget Committee Chairman Lindsey Graham said in a floor speech. The bond market has shown signs of worry about the bill not passing in time to raise the debt ceiling, which would risk a devastating default. In recent weeks, the interest rate on some Treasury debt due in August has risen more than yields of short-term Treasury bills coming due around the same time, a sign investors are nervous. This also happened in 2023, when Congress reached a last-minute deal to avoid what would have been a catastrophic default. As Republicans have pushed forward on a bill expected to drive the debt higher, Trump has stepped up his campaign against Federal Reserve Chairman Jerome Powell, repeatedly urging him to slash U.S. interest rates to 1%, a move that would dull the bill's deficit effects. DEEPENING DEFICITS If the legislation now passes the House and gets signed into law by Trump, independent analysts warn that Americans can look forward to growing deficits, rising interest rates, waning economic vitality and mounting debt - if not an outright dislocation in U.S. bond markets. "Republicans can spin it any way they want, but ultimately we're heading towards deficits of $4 trillion within a decade," said Jessica Riedl, a former Senate Republican aide who is now a senior fellow at the right-leaning Manhattan Institute. U.S. government debt interest payments have surged over the past few years, going from about $500 billion in 2020 to over $1.1 trillion last year. Analysts and investors warn of a longer-term danger from the precedent set by the Senate bill, saying it provides a template that both parties can use in coming years to hide the cost of legislative priorities that expand the debt and deficits. Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, warned that the alternative Republican baseline marks a dangerous new chapter in American political rhetoric and calls into question the readiness of political leaders to operate transparently. "We have, I believe, entered a realm where there is no longer a consistent set of facts or independent sources that are being used," Akabas told Reuters. "It makes it very difficult for the American public to understand what the consequences of legislation are going to be."
Yahoo
01-07-2025
- Business
- Yahoo
Republicans ignore debt worry as they push forward on Trump tax-cut bill
By David Morgan, Bo Erickson and Davide Barbuscia WASHINGTON (Reuters) -As President Donald Trump's Republicans push ahead on a sweeping tax-cut and spending bill that nonpartisan analysts say could add $3.3 trillion to the nation's debt over the next decade, they're taking a new approach - denying there is anything to worry about. Instead, they argue that extending and adding to tax cuts signed into law by Trump in 2017 during his first term - which were set to sunset in 2025 to limit their hit to the deficit - will not drive the debt higher. Independent analysts and investors said the approach, which follows years of growing government debt under both parties, threatens to erode the country's fiscal health and further sap confidence in financial markets, already shaken by Moody's move in May to strip the U.S. of its top-tier AAA rating. The bill, passed by the Senate on Tuesday and which House of Representatives Republican leaders aim to pass later this week, will also raise the federal government's self-imposed debt ceiling by $5 trillion, averting the risk of a disastrous default on the nation's $36.2 trillion in debt sometime this summer. A handful of Republican deficit hawks have said that fact alone undercuts their party's argument that the bill does not add to the debt. "They are effectively moving the goal posts and making it much easier to run these incredible deficits ad infinitum," said Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income, which manages bond funds worth around $860 billion as of March. "That should really create concern in the market about these ongoing large budget deficits." Democrats - effectively sidelined by a Republican maneuver that bypasses normal chamber rules requiring 60 of the 100 senators to agree on most legislation - have blasted the Republican argument as chicanery. They say the bill, which would also lift taxes on tips and overtime, and boost spending on the military and border security while cutting spending on Medicaid and food assistance, will disproportionately help the wealthy and burden lower-income Americans. "It is fakery. The budget numbers are a fraud, but the deficits will be very real. The prospect of a catastrophic debt spiral is very real," Senator Ron Wyden of Oregon said on the Senate floor on Monday. 'PROTECTING THEIR WALLETS' Republican Senate Finance Committee Chairman Mike Crapo argued that extending the 2017 tax cuts will not add to the debt. "If you don't raise taxes, you're not changing the tax code, you're making it bring in the same revenue that it brought in before," said Crapo, of Idaho. "You're not increasing the deficit, you're protecting their wallets." Republicans also called Democrats hypocritical for accusing them of driving the deficit higher, noting that during President Joe Biden's term the then-Democratic-controlled Congress passed costly legislation using the same fast-track maneuver to circumvent the 60-vote threshold. Senate Republicans said their current policy accounting approach is necessary to make the tax cuts permanent to provide certainty for businesses and investors, something Trump demanded during the 2024 campaign. Their approach is backed by business lobbyists including the U.S. Chamber of Commerce. "That's a good thing for the American people. That's a good thing for the economy," Senate Budget Committee Chairman Lindsey Graham said in a floor speech. The bond market has shown signs of worry about the bill not passing in time to raise the debt ceiling, which would risk a devastating default. In recent weeks, the interest rate on some Treasury debt due in August has risen more than yields of short-term Treasury bills coming due around the same time, a sign investors are nervous. This also happened in 2023, when Congress reached a last-minute deal to avoid what would have been a catastrophic default. As Republicans have pushed forward on a bill expected to drive the debt higher, Trump has stepped up his campaign against Federal Reserve Chairman Jerome Powell, repeatedly urging him to slash U.S. interest rates to 1%, a move that would dull the bill's deficit effects. DEEPENING DEFICITS If the legislation now passes the House and gets signed into law by Trump, independent analysts warn that Americans can look forward to growing deficits, rising interest rates, waning economic vitality and mounting debt - if not an outright dislocation in U.S. bond markets. "Republicans can spin it any way they want, but ultimately we're heading towards deficits of $4 trillion within a decade," said Jessica Riedl, a former Senate Republican aide who is now a senior fellow at the right-leaning Manhattan Institute. U.S. government debt interest payments have surged over the past few years, going from about $500 billion in 2020 to over $1.1 trillion last year. Analysts and investors warn of a longer-term danger from the precedent set by the Senate bill, saying it provides a template that both parties can use in coming years to hide the cost of legislative priorities that expand the debt and deficits. Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, warned that the alternative Republican baseline marks a dangerous new chapter in American political rhetoric and calls into question the readiness of political leaders to operate transparently. "We have, I believe, entered a realm where there is no longer a consistent set of facts or independent sources that are being used," Akabas told Reuters. "It makes it very difficult for the American public to understand what the consequences of legislation are going to be." Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
09-06-2025
- Business
- Yahoo
Analysis-Wall Street, Main Street push for foreign tax rethink in US budget bill
By Carolina Mandl and Bo Erickson NEW YORK/WASHINGTON (Reuters) -Industry groups representing sectors including real estate, finance and multinational companies are pushing for the reduction or exclusion of a retaliatory tax targeting foreign investors in the U.S. in the Republican tax bill, as they see it as a threat to their businesses and to the broader markets and economy. The proposed tax, known as Section 899, applies a progressive tax burden of up to 20% on foreign investors' U.S. income as pushback against countries that impose taxes the U.S. considers unfair, such as digital service taxes. It could raise $116 billion in taxes over 10 years. Some individual companies are also pushing for action, according to two lawyers familiar with their clients' plans, who did not name specific companies due to client confidentiality. 'Lobbying surrounding Section 899 is at peak levels,' said Jeff Paravano, a former Treasury Department official who is now chair of law firm BakerHostetler's tax group. The move comes as Senate Finance Committee Chairman Mike Crapo, the Republican in charge of the chamber's tax writing provisions, and other Republicans are in close coordination with President Donald Trump on the tax bill, having met on Wednesday. The White House declined to comment. Crapo said he would not comment on ongoing discussions about the bill. Global investors hold almost $40 trillion in U.S. assets, such as securities, loans and deposits, according to the U.S. Treasury International Capital Reporting System. This raises concerns about the ripple impact of the bill. "It has the potential to be a very negative impact on the free flow of capital from the U.S. and through businesses that are multinational," said Gabriel Grossman, a U.S. tax partner at Linklaters, adding he has seen some clients put planned investments in the U.S. on pause until they have more clarity on the new levies. The broader bill itself is also creating much debate as it is forecast to add about $2.4 trillion to the U.S. debt and has sparked an explosive feud between Trump and his erstwhile key ally Elon Musk, the billionaire CEO of Tesla. COLLATERAL DAMAGE Industries across different sectors are on high alert. The new levy could increase taxes from rents and real estate investment trusts, gains from property sales and securitized products. "There is a legitimate fear among investors that, if this goes through, it could impact investments, and that it would create higher costs for real estate in terms of getting financing," said David McCarthy, managing director at the CRE Finance Council, a nonpartisan trade group. "It could depress the value of real estate if you don't have as much money to finance property purchases." The asset management industry is concerned about outflows. "We encourage the Senate to make this provision more targeted to respond to unfair foreign taxes and other concerning measures rather than disincentivizing beneficial foreign investment in the U.S.," a spokesperson for the Investment Company Institute said. The investment community is also working to clarify whether Treasuries and corporate bonds will remain exempt as they are currently subject to a portfolio interest exception that applies no taxation, lawyers and industry sources said. "There's reason to believe that fixed-income assets wouldn't be in scope, but there's still considerable uncertainty about this point," Morgan Stanley strategist Michael Zezas said in a note to clients. A footnote part of the Budget Committee report, which provides direction to taxpayers, courts and the Treasury in interpreting the statute, says that Section 899 "does not apply to portfolio interest." Foreigners' equity investments, however, do not count with the portfolio interest protection and could be taxed, lawyers and banks said. MULTINATIONALS Multinational companies could face a new tax burden on dividends and inter-company loans, potentially reducing profit, according to Section 899. Jonathan Samford, president of the Global Business Alliance, a lobbying group for international companies in the U.S., said many multinationals could decide to shut down operations in the U.S., risking 8.4 million jobs in the country. "Those companies will not be paying U.S. tax whatsoever because they will not be able to operate in that punitive, high-tax environment," he said. Morgan Stanley said in a note to clients a repatriation of profits out of the U.S. and pressure on the U.S. dollar. Corporate loans could also become more expensive, as loans extended by foreign banks might be subject to the new tax burden if section 899 overrides current treaties, lawyers said, adding that companies could end up paying more for the debt to make up for the tax increase. SENATE PASSAGE Investors are hoping for some changes in the Senate. Senator Steve Daines, a Montana Republican on the Finance Committee, said it may be necessary to clarify the language in Section 899. 'We want to make sure we don't have tax policies that in some way would diminish the fact that we are the gold standard in the world,' Daines said. Morgan Stanley said in a note that it expects "sufficient Senate Republicans to take notice and clarify the policy to mitigate this risk" of increasing the cost of capital for the U.S. "It actually is pretty much of a nuclear bomb," said Pascal Saint-Amans, partner at Brunswick Group, who is also the former tax chief of the Organization for Economic Cooperation and Development, who led the 2021 global tax treaty. "The coverage (of Section 899) seems extremely broad and the terms are not extremely well-defined."
Mint
09-06-2025
- Business
- Mint
Wall Street, Main Street push for foreign tax rethink in US budget bill
Concerns over potential negative impact on U.S. investments and jobs Senate Republicans may clarify impact on Treasuries to mitigate risks Multinationals may shut U.S. operations, risking 8.4 million jobs, says association By Carolina Mandl, Bo Erickson NEW YORK/WASHINGTON, - Industry groups representing sectors including real estate, finance and multinational companies are pushing for the reduction or exclusion of a retaliatory tax targeting foreign investors in the U.S. in the Republican tax bill, as they see it as a threat to their businesses and to the broader markets and economy. The proposed tax, known as Section 899, applies a progressive tax burden of up to 20% on foreign investors' U.S. income as pushback against countries that impose taxes the U.S. considers unfair, such as digital service taxes. It could raise $116 billion in taxes over 10 years. Some individual companies are also pushing for action, according to two lawyers familiar with their clients' plans, who did not name specific companies due to client confidentiality. 'Lobbying surrounding Section 899 is at peak levels,' said Jeff Paravano, a former Treasury Department official who is now chair of law firm BakerHostetler's tax group. The move comes as Senate Finance Committee Chairman Mike Crapo, the Republican in charge of the chamber's tax writing provisions, and other Republicans are in close coordination with President Donald Trump on the tax bill, having met on Wednesday. The White House declined to comment. Crapo said he would not comment on ongoing discussions about the bill. Global investors hold almost $40 trillion in U.S. assets, such as securities, loans and deposits, according to the U.S. Treasury International Capital Reporting System. This raises concerns about the ripple impact of the bill. "It has the potential to be a very negative impact on the free flow of capital from the U.S. and through businesses that are multinational," said Gabriel Grossman, a U.S. tax partner at Linklaters, adding he has seen some clients put planned investments in the U.S. on pause until they have more clarity on the new levies. The broader bill itself is also creating much debate as it is forecast to add about $2.4 trillion to the U.S. debt and has sparked an explosive feud between Trump and his erstwhile key ally Elon Musk, the billionaire CEO of Tesla. Industries across different sectors are on high alert. The new levy could increase taxes from rents and real estate investment trusts, gains from property sales and securitized products. "There is a legitimate fear among investors that, if this goes through, it could impact investments, and that it would create higher costs for real estate in terms of getting financing," said David McCarthy, managing director at the CRE Finance Council, a nonpartisan trade group. "It could depress the value of real estate if you don't have as much money to finance property purchases." The asset management industry is concerned about outflows. "We encourage the Senate to make this provision more targeted to respond to unfair foreign taxes and other concerning measures rather than disincentivizing beneficial foreign investment in the U.S.," a spokesperson for the Investment Company Institute said. The investment community is also working to clarify whether Treasuries and corporate bonds will remain exempt as they are currently subject to a portfolio interest exception that applies no taxation, lawyers and industry sources said. "There's reason to believe that fixed-income assets wouldn't be in scope, but there's still considerable uncertainty about this point," Morgan Stanley strategist Michael Zezas said in a note to clients. A footnote part of the Budget Committee report, which provides direction to taxpayers, courts and the Treasury in interpreting the statute, says that Section 899 "does not apply to portfolio interest." Foreigners' equity investments, however, do not count with the portfolio interest protection and could be taxed, lawyers and banks said. Multinational companies could face a new tax burden on dividends and inter-company loans, potentially reducing profit, according to Section 899. Jonathan Samford, president of the Global Business Alliance, a lobbying group for international companies in the U.S., said many multinationals could decide to shut down operations in the U.S., risking 8.4 million jobs in the country. "Those companies will not be paying U.S. tax whatsoever because they will not be able to operate in that punitive, high-tax environment," he said. Morgan Stanley said in a note to clients a repatriation of profits out of the U.S. and pressure on the U.S. dollar. Corporate loans could also become more expensive, as loans extended by foreign banks might be subject to the new tax burden if section 899 overrides current treaties, lawyers said, adding that companies could end up paying more for the debt to make up for the tax increase. Investors are hoping for some changes in the Senate. Senator Steve Daines, a Montana Republican on the Finance Committee, said it may be necessary to clarify the language in Section 899. 'We want to make sure we don't have tax policies that in some way would diminish the fact that we are the gold standard in the world,' Daines said. Morgan Stanley said in a note that it expects "sufficient Senate Republicans to take notice and clarify the policy to mitigate this risk" of increasing the cost of capital for the U.S. "It actually is pretty much of a nuclear bomb," said Pascal Saint-Amans, partner at Brunswick Group, who is also the former tax chief of the Organization for Economic Cooperation and Development, who led the 2021 global tax treaty. "The coverage seems extremely broad and the terms are not extremely well-defined." This article was generated from an automated news agency feed without modifications to text.
Yahoo
30-05-2025
- Business
- Yahoo
Tax bill contains 'sledgehammer' for Trump to retaliate against foreign digital taxes
By Bo Erickson WASHINGTON (Reuters) -U.S. President Donald Trump would have the power to retaliate against countries that impose special digital service taxes on large U.S. technology companies like Amazon and Alphabet, under a provision in the sweeping tax bill that Congress is considering. "If foreign countries want to come in the United States and tax US businesses, then those foreign-based businesses ought to be taxed as well," said Representative Ron Estes, a Kansas Republican who helped craft the provision. Some 17 countries in Europe and others around the world impose or have announced such taxes on U.S. tech products like Meta's Instagram. Germany announced on Thursday it was considering a 10% tax on platforms like Google. The levies have drawn bipartisan ire in Washington. Democrats who oppose much of the tax bill have not spoken out against the retaliatory tax provision, found in Section 899 of the 1,100-page bill. Trump has been pressing foreign countries to lower barriers to U.S. commerce. Under the bill, Congress would empower his administration to impose tax hikes on foreign residents and companies that do business in the U.S. The U.S. Constitution gives Congress, not the president, the power to decide on taxes and spending. The provision could raise $116 billion over the next decade, according to the Joint Committee on Taxation. But some experts warned that an unintended consequence of retaliatory taxes could be less foreign investment in the U.S. "This new Section 899 provision brings a sledgehammer to the idea that the United States will allow itself to be characterized as a tax haven by anyone," said Peter Roskam, former Republican congressman and head of law firm Baker Hostetler's federal policy team. The House of Representatives narrowly passed the bill on May 22, and it now heads to the Senate. Democrats broadly oppose the Republicans' tax and spending bill, which advances many of Trump's top priorities such as an immigration crackdown, extending Trump's 2017 tax cuts and ending some green energy incentives. Section 899 would allow the Treasury Department to label the foreign tech taxes "unfair" and place the country in question on a list of "discriminatory foreign countries." Some other foreign taxes also would be subject to scrutiny. Once on the list, a country's individuals and its companies that operate in the U.S. could face stiffer tax rates that could increase each year, up to 20 percentage points. Joseph Wang, chief investment officer at Monetary Macro, said Section 899 could help Trump reduce trade imbalances because if foreign investment decreases it could depreciate the U.S. dollar. This in turn could spur exports of U.S. products by making them cheaper overseas. Portfolio interest would remain exempt from any tax Trump imposes, but some experts cautioned that taxing foreigners could quell foreign investment in the U.S. "Foreign investors may change their behavior to avoid the taxes in various ways, including potentially by simply investing elsewhere," said Duncan Hardell, an advisor at New York University's Tax Law Center. PUSH BACK TO GLOBAL MINIMUM TAX The new approach follows the 15% minimum global corporate tax deal negotiated by the administration of Democratic former President Joe Biden. Republicans, led by Representative Jason Smith of Missouri, chairman of the House tax committee, opposed that approach, arguing it unfairly benefits Chinese companies. Foreign countries have invoked that global minimum to slap higher taxes on U.S. tech firms, if they concluded that generous U.S. tax credits for research and development pushed their tax burden below that 15% threshold. Trump in February directed his administration to combat foreign digital taxes, but they were not addressed in the trade deal announced in May between the U.S. and the United Kingdom, which imposes a 2% levy on foreign digital services. It was unclear if the Treasury Department would actually use the new authority if it becomes law, or if the mere threat of action would convince other countries to change course. The department did not share its intended strategy when asked. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
